MPCs, MPEs and Multipliers: A Trilemma for New Keynesian Models

Auclert, Adrien; Bardóczy, Bence; Rognlie, Matthew

doi:10.3386/w27486

Cited by 10 publications

(7 citation statements)

References 6 publications

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“…However, our estimates are for completed transfers, and are therefore likely to be smaller, as households may save more out of a temporary income shock than a more permanent income shock. Second, our estimate is smaller than estimates of the one year impacts of cash transfers in richer countries (0.5, from Auclert et al (2020)). We rationalize this result through the lens of a model of intertemporal substitution and discuss it further in Section 4.1.…”

Section: Resultscontrasting

confidence: 70%

Intervention Size and Persistence

Kondylis¹,

Loeser²

2021

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Section: Resultscontrasting

confidence: 70%

Intervention Size and Persistence

Kondylis¹,

Loeser²

2021

Policy Research Working Papers

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“…Wages and the terms of trade are predicted to fall by 2 percent, employment by about 1 percent, and net exports are predicted to increase by 0.9 percent. These stronger responses are reminiscent, but different from the finding in Monacelli and Perotti (2010), Bilbiie (2011) and more recently Auclert and Rognlie (2017) who have emphasized that GHH preferences can generate large government spending multipliers in New Keynesian models thanks to labor-consumption complementarities.…”

Section: Compositional Effects Of Austeritycontrasting

confidence: 63%

Does Austerity Go Along with Internal Devaluations?

Lambertini

Proebsting

2019

IMF Econ Rev

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Cuts to government spending rather than increases in consumption taxes are statistically associated with internal devaluations in the euro area during the period 2010-2014. Countries that cut spending experienced a decline in nominal wages, rising net exports, a fall in the relative price of non-tradables and a shift of consumption towards nontradables. We show that these patterns are generally consistent with a neoclassical small open economy model with GHH preferences. The main remaining discrepancy between model and data is a missing terms of trade response in the data: Export prices did not decline in austere countries (nor did import prices), giving rise to asymmetric expenditure switching: Current account improvements are solely driven by falls in imports rather than increasing exports.

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“…Based on these computations, they conclude that income effects are modest. This conclusion, in turn, led a number of studies to build models specifically around the assumption that income effects are essentially negligible (Dyrda and Pedroni, 2018;Wolf, 2019;Auclert, Bardóczy and Rognlie, 2020). 3 2 In Appendix J we provide a detailed comparison to this past work.…”

Section: Introductionmentioning

confidence: 99%

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income

Golosov,

Graber,

Mogstad

et al. 2023

The Quarterly Journal of Economics

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We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event study design. We first examine individual and household earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra dollar of unearned income in a given period reduces household labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption expenditure by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Next, we examine margins of adjustment other than earnings and, in the course of doing so, address a number of important economic questions about how additional wealth or unearned income affect retirement decisions and labor market dynamics, family formation and dissolution, entrepreneurship and self-employment, and geographic mobility and neighborhood choice. Lastly, we carefully compare our findings to those reported in existing lottery studies. This comparison reveals that existing U.S. studies substantially underestimate wealth and income effects because they use measures that understate the earnings responses and overstate the after-tax wealth changes associated with lottery wins.

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MPCs, MPEs and Multipliers: A Trilemma for New Keynesian Models

Cited by 10 publications

References 6 publications

Intervention Size and Persistence

Intervention Size and Persistence

Does Austerity Go Along with Internal Devaluations?

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income

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